MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

Transcription

1 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED SGX Quarterly Report for the quarter and year ended 31 December 2014

2 CONTENTS REPORT SUMMARY... 1 REPORT SUMMARY... 2 PERFORMANCE REVIEW OF MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED... 4 INTRODUCTION... 5 REVIEW OF NET INCOME ON AN ADJUSTED BASIS... 9 FINANCIAL STATEMENTS FOR THE QUARTER AND YEAR ENDED 31 DECEMBER STATEMENTS OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME EARNINGS PER SHARE STATEMENTS OF CHANGES IN EQUITY CHANGES IN SHARE CAPITAL CONSOLIDATED STATEMENT OF CASH FLOWS RECONCILIATION OF NET INCOME ON AN ADJUSTED BASIS TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME MANAGEMENT REVIEW: FOR THE QUARTER AND YEAR ENDED 31 DECEMBER REVIEW OF REVENUE AND EXPENSES FOR THE QUARTER AND YEAR ENDED 31 DECEMBER REVIEW OF NET ASSETS AND STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER INVESTMENT PORTFOLIO DISCUSSION CONFIRMATION OF THE BOARD PURSUANT TO RULE 705(5) OF THE LISTING MANUAL DISCLAIMERS... 44

3 REPORT SUMMARY MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 1

4 REPORT SUMMARY KEY HIGHLIGHTS Net income of S$9.7 million Dividend declared of 0.90 Singapore cents per ordinary share (cps) for the twelve months to 31 December 2014 FINANCIAL HIGHLIGHTS Macquarie International Infrastructure Fund Limited (MIIF or Company) reported a net income on an adjusted basis (net income) of $9.7 million for the twelve months ended 31 December 2014, compared to a net income on an adjusted basis of $14.2 million in the prior corresponding period (pcp). The reduction is due to the cessation of distribution income from Taiwan Broadband Communications (TBC), which was divested in MIIF s NAV as at 31 December 2014 was $136.2 million 1 (or 11.8 cps) compared to $141.0 million (or 12.3 cps) as at 30 September It should be noted that no provision for a potential success fee to be earned by MIIF s manager has been made as at 31 December 2014 (refer to footnote 1 for more details). OPERATIONAL HIGHLIGHTS Operational highlights for HNE are as follows: Total traffic volumes of 19.4 million for the quarter ended 31 December 2014 were 6.4% higher than the prior corresponding period due to favourable traffic drivers, such as the continued positive impact of Guanghe Expressway, a complementary feeder road which opened in December 2011, and on-going driver recognition of HNE s lower toll rates following the toll rate standardisation. HNE s revenue for the quarter was RMB156.1 million, 11.8% higher than the prior corresponding period. Overall, HNE s revenue of RMB588.5 million for the 12 months to 31 December 2014 was 13.7% higher than the prior corresponding period driven by an 11.5% increase in traffic for the period. The process to divest HNE has to date generated a range of indicative offers from potential buyers. The divestment process is ongoing and if successfully executed, this would lead to the winding up of MIIF. OUTLOOK Whilst HNE, in the twelve months to 31 December 2014, has benefited from favourable traffic drivers (such as those illustrated above), the slowdown in the Chinese economy is anticipated to moderate the rate of growth in HNE's traffic volumes. In addition, HNE is no longer benefitting from the traffic diversion caused by the partial closure of a section of Xinguang Expressway and a section of the Northern Ring Road as road works concluded in HNE has undertaken an assessment of maintenance costs and capital expenditure requirements following the strong growth in traffic driven by on-going driver recognition of HNE s lower toll rates. It is expected that additional capital expenditure will be required to ensure that maintenance standards continue to be met. MIIF is focused on divesting HNE in a timely manner whilst maximising proceeds for MIIF s shareholders. In accordance with MIIF s continuous disclosure obligations, MIIF will keep the market appropriately informed of further developments in the divestment of HNE. 1 Reference is made to the amended management fee arrangement with MIIF s manager, Macquarie Infrastructure Management (Asia) Pty Limited (MIMAL), which was approved by MIIF s shareholders at the MIIF Annual General Meeting on 8 March MIMAL will be entitled to a success fee when total divestment proceeds of $694.9 million (the threshold level) are achieved from the divestment of TBC, HNE, Changshu Xinghua Port (CXP) and Miaoli Wind. Divestment proceeds received from the sale of TBC, CXP and Miaoli Wind were $617.3 million. The threshold level will be met if divestment proceeds from the sale of HNE exceed $77.6 million. However, since the conditions for MIIF to pay the success fee have not been met, there is no present obligation to pay the success fee and accordingly a provision for a potential success fee has not been made as at 31 December Refer to note K(x) on page 40.= PAGE 2 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

5 DIVIDEND The Board of Directors of MIIF has declared a final dividend of 0.90 cps for the twelve months to 31 December The ex-dividend date is 3 March 2015 with the final dividend expected to be paid on 16 March MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 3

6 PERFORMANCE REVIEW OF MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 4 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

7 INTRODUCTION ABOUT MIIF Macquarie International Infrastructure Fund Limited (MIIF or the Company), a Bermuda-registered mutual fund Company, is an Asia-listed owner and operator of private infrastructure businesses. MIIF was the first infrastructure Company to list on the Main Board of the Singapore Exchange Securities Trading Limited (SGX-ST). MIIF listed on the SGX-ST on 27 May 2005 and has approximately 7,400 shareholders. MIIF is managed by Macquarie Infrastructure Management (Asia) Pty Limited (MIMAL), a subsidiary of Macquarie Limited. As at 31 December 2014, MIIF s portfolio comprises the following: Investment portfolio Percentage ownership Percentage of portfolio by value HNE 81.0% 96.8% Cash and cash equivalents N/A 3.2% MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 5

8 DIVIDEND POLICY MIIF intends to pay out as ordinary dividends to shareholders the majority of normal distributions that it receives or expects to receive from its investment and not to retain significant cash balances in excess of prudent reserves. Prudent reserves are required to ensure that MIIF remains solvent and that, amongst other things, operating costs such as finance costs, audit fees, registry fees and hedging costs are adequately provided for. In line with guidance provided at MIIF s Annual General Meeting on 21 April 2014 and reaffirmed in MIIF s announcement on 14 May 2014, given HNE pays a distribution to MIIF annually, MIIF is expected to also pay an annual dividend to MIIF s shareholders moving forward. As a Bermudian incorporated Company, MIIF is governed by the Bermuda Companies Act The Bermuda Companies Act 1981 allows companies that are governed by it to declare and pay dividends to shareholders in excess of accounting profits and reserves. Consequently, it is possible that the dividends that MIIF s Board of Directors (the Board) intends to declare and pay for the period may exceed the total of MIIF s retained earnings and accounting profits generated for the period. Such situations may arise as a result of unrealised losses that MIIF is required to recognise due to movements in foreign exchange rates, changes in the value of MIIF s unlisted securities and other business specific and general economic factors. These unrealised losses do not impact MIIF s cash flow and its ability to pay dividends in the current period. DIVIDENDS The Board has declared a final dividend of 0.90 cps for the twelve months ended 31 December 2014 (six months ended 31 December 2013: 0.80 cps) For the year ended 31 December 2014 For the half-year ended 31 December 2013 Name of Dividend Final Final Dividend Rate - Ordinary 0.90 cps 0.80 cps Announcement Date 18 February February 2014 Ex-dividend Date 3 March March 2014 Book Closure Date 5 March March 2014 Date Payable 16 March March 2014 BREAKDOWN OF TOTAL ANNUAL DIVIDEND For the year ended 31 December 2014 For the year ended 31 December 2013 Ordinary 10, ,248 2 Total 10,349 17,248 1 To be paid on 16 March Includes an amount of $9.2 million which was paid on 21 March PAGE 6 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

9 The table below provides details of MIIF s historical dividends: Period ended Singapore cps 30 June December June December June December June December June December June December June December June December December Special dividend June December December 2014 (to be paid on 16 March 2015) 0.90 The table above does not include the following returns of capital paid to shareholders: On 31 May 2013 of cps and on 6 June 2013 of 1.04 cps following the disposal of TBC; On 29 October 2013 of 9.70 cps following the disposal of CXP. TAXATION As MIIF is a Bermudian incorporated mutual fund company and is not a resident in Singapore for tax purposes, dividends paid by MIIF will be regarded as foreign-sourced dividend. The foreign-sourced dividends received by individuals in Singapore (whether resident or otherwise) are exempt from Singapore income tax. Foreign-sourced dividends received by Singapore tax residents who are non-individual shareholders (such as corporations) in Singapore are generally subject to Singapore income tax, unless specifically exempted (subject to conditions). MIIF does not give tax advice and recommends that all shareholders obtain their own tax advice in relation to the dividend payment. MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 7

10 STATEMENT OF COMPREHENSIVE INCOME ANALYSIS Net income on an adjusted basis as set out on page 9 represents the earnings of MIIF that underpins the payment of dividends to shareholders, and as such is one of the key measures that the Board focuses on to determine the amount of dividends that are ultimately paid to shareholders. This measure excludes all unrealised gains or losses on investments and other balance sheet items that are ordinarily captured in a statement of comprehensive income prepared in accordance with all applicable accounting standards. The following table compares the unaudited actual results for the quarter and year ended 31 December 2014 to the quarter and year ended 31 December PAGE 8 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

11 REVIEW OF NET INCOME ON AN ADJUSTED BASIS NET INCOME ON AN ADJUSTED BASIS 1 Revenue Note 2 Quarter ended Quarter ended Income from investments A 12,315-12,315 20,023 Interest income B (i) Realised net foreign exchange (loss)/gain B (ii) (244) - (244) 13 Other income B (iii) Total revenue 12, ,085 20,071 Expenses Base management fees C (i) (190) (209) (785) (1,947) Directors fees C (ii) (118) (114) (653) (434) Lending fees C (iii) (277) Other operating expenses C (iv) (205) (298) (963) (3,187) Total operating expenses (513) (621) (2,401) (5,845) Net income/(loss) on an adjusted basis 11,558 (613) 9,684 14,226 Amounts not included in the above analysis: Unrealised foreign exchange movement on hedged transactions Unrealised foreign exchange movement on balance sheet items held in foreign currencies Net (loss)/gain on the movement in the fair value of MIIF s financial assets (2) (123) (11) (166) (16,333) (27) (34,940) 56,715 Total GAAP adjustments (16,335) (67) (34,951) 56,629 Net (loss)/income on an unconsolidated basis 3 (4,777) (680) (25,267) 70,855 Consolidation adjustments to net income 5 (1,459) (7,569) (8,694) Net (loss)/income on a consolidated basis (4,772) (2,139) (32,836) 62, All figures, unless stated otherwise are presented in Singapore dollars, which is MIIF s functional and presentation currency. Notes to the net income on an adjusted basis can be found on pages 22 to 25. Please refer to page 20 for reconciliation to consolidated statement of comprehensive income. MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 9

12 REVIEW OF NET INCOME ON AN ADJUSTED BASIS For the year ended 31 December 2014, MIIF reported a net income on an adjusted basis of $9.7 million compared to $14.2 million in the pcp. Income from investments is $12.3 million for the year ended 31 December 2014 (2013: $20.0 million). Following the sale of CXP, Miaoli Wind and TBC during 2013, MIIF only has one remaining business, HNE, which paid its annual distribution in December quarter. Total revenue includes interest income generated on surplus cash balances, realised net foreign exchange (loss)/gain and other income. The foreign exchange loss of $0.2 million is due to the realisation of hedges relating to the HNE distribution received during the quarter ended 31 December MIIF s total operating expenses of $2.4 million for the year ended 31 December 2014 were $3.4 million lower compared to the pcp. The decrease in total operating expenses was predominantly due to reduction in base management fees and lower other operating expenses. PAGE 10 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

13 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED FINANCIAL STATEMENTS FOR THE QUARTER AND YEAR ENDED 31 DECEMBER 2014 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 11

14 STATEMENTS OF FINANCIAL POSITION Financial statements of the Company include the results and balances of the parent entity only, i.e. MIIF. MIIF is required to produce financial statements which include balances from all entities that are controlled by MIIF. These entities are listed in note K(ix)(b) on page 39. The material additional balances are in respect of South China Highway Development (H.K.) Limited, the holding Company of HNE. Note 1 as at as at Company as at Company as at Assets Current assets Cash and cash equivalents D (i) 18,160 16,113 3,989 16,020 Trade and other receivables D (ii) , Financial assets at fair value through profit or loss D (iii) & (iv) 133, , , ,200 Other assets Total assets 151, , , ,405 Liabilities 2 Current liabilities Trade and other payables E (i) 8,263 6, Total liabilities 8,263 6, Net assets 143, , , ,710 Equity Capital and reserves attributable to owners of the parent Share capital 531, , , ,740 Foreign currency translation reserve (26,198) (33,677) - - Accumulated losses (375,428) (333,393) (395,496) (361,030) 130, , , ,710 Non-controlling interest E (ii) 13,499 17, Total equity 143, , , , Notes to the Statements of financial position can be found on pages 26 to 30. Contingent liability in respect of the potential success fee payable to the manager has been disclosed in note K(x) on page 40. PAGE 12 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

15 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Income Quarter ended Quarter ended Variance 1 % Year ended Year ended Variance 1 % Interest income - 8 (100.0) (71.4) Net foreign exchange (loss)/gain (194) (1,246) 84.4 (8,008) 4,092 (>100.0) Net (loss)/gain on financial assets at fair value through profit or loss 2 (5,060) 83 (>100.0) (25,689) 78,695 (>100.0) Other income ,722 (63.8) Total income (5,078) (1,003) (>100.0) (33,064) 84,544 (>100.0 ) Expenses 4 Base management fees (190) (209) 9.1 (785) (1,947) 59.7 Professional services (88) (299) 70.6 (368) (2,108) 82.5 Directors fees (305) (296) (3.0) (945) (723) (30.7) Lending fees (277) Net loss on disposal of subsidiary (12,859) Other operating expenses (1,042) (264) (>100.0) (1,723) (2,325) 25.9 Total operating expenses (1,625) (1,068) (52.2) (3,821) (20,239) 81.1 Effect of deconsolidation (100.0) (Loss)/profit before income tax (6,703) (2,071) (>100.0) (36,885) 64,400 (>100.0) Income tax expense (Loss)/profit after income tax (6,703) (2,071) (>100.0) (36,885) 64,400 (>100.0) (Loss)/profit attributable to: Owners of the parent (4,772) (2,139) (>100.0) (32,836) 62,161 (>100.0) Non-controlling interest (1,931) 68 (>100.0) (4,049) 2,239 (>100.0) (Loss)/profit after income tax (6,703) (2,071) (>100.0) (36,885) 64,400 (>100.0) A positive variance is favourable to the and a negative variance is unfavourable to the. Income from investments is shown as part of Net (loss)/gain on financial assets at fair value through profit or loss as per MIIF s accounting policies and International Financial Reporting Standards (IFRS). Other income comprises refund of unclaimed cash distribution pertaining to period up to 31 March 2008 and for the pcp includes income earned from the provision of management services to its associates. Contingent liability in respect of the potential success fee payable to the manager has been disclosed in note K(x) on page 40. Effect of deconsolidation is the net gain recognised due to deconsolidation of Miaoli Wind on 14 November 2013 as shown in note K(ix)(a) on page 38. MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 13

16 Quarter ended Quarter ended Variance 1 % Year ended Year ended Variance 1 % (Loss)/profit after income tax (6,703) (2,071) (>100.0) (36,885) 64,400 (>100.0) Other comprehensive income: Foreign currency translation reserve (432) 1,112 (>100.0) 7,332 (4,234) >100.0 Total comprehensive income (7,135) (959) (>100.0) (29,553) 60,166 (>100.0) Total comprehensive income attributable to: Owners of the parent (5,042) (899) (>100.0) (25,357) 58,297 (>100.0) Non-controlling interest (2,093) (60) (>100.0) (4,196) 1,869 (>100.0) Total comprehensive income (7,135) (959) (>100.0) (29,553) 60,166 (>100.0) 1 A positive variance is favourable to the and a negative variance is unfavourable to the. PAGE 14 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

17 EARNINGS PER SHARE Weighted average number of shares in issue used in calculation of basic earnings per share Weighted average number of shares in issue used in calculation of diluted earnings per share Quarter ended Quarter ended 1,149,857 1,149,857 1,149,857 1,149,857 1,149,857 1,149,857 1,149,857 1,149,857 Earnings per share (Loss)/profit attributable to owners of the parent (4,772) (2,139) (32,836) 62,161 Basic earnings per share (cents) (0.42) (0.19) (2.86) 5.41 Diluted earnings per share (cents) (0.42) (0.19) (2.86) 5.41 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 15

18 STATEMENTS OF CHANGES IN EQUITY Share capital Accumulated losses Foreign currency translation reserve Total Noncontrolling interest Total equity Balance as at 1 January ,740 (333,393) (33,677) 164,670 17, ,365 Changes in equity for the year ended 31 December 2014 Dividends paid - (9,199) - (9,199) - (9,199) Total comprehensive income - (32,836) 7,479 (25,357) (4,196) (29,553) Balance as at 31 December ,740 (375,428) (26,198) 130,114 13, ,613 Balance as at 1 October ,740 (370,656) (25,928) 135,156 15, ,748 Changes in equity for the quarter ended 31 December 2014 Total comprehensive income - (4,772) (270) (5,042) (2,093) (7,135) Balance as at 31 December ,740 (375,428) (26,198) 130,114 13, ,613 Balance as at 1 January ,165,321 (321,388) (29,813) 814,120 15, ,946 Changes in equity for the year ended 31 December 2013 Return of capital (633,581) - - (633,581) - (633,581) Dividends paid - (74,166) - (74,166) - (74,166) Total comprehensive income - 62,161 (3,864) 58,297 1,869 60,166 Balance as at 31 December ,740 (333,393) (33,677) 164,670 17, ,365 Balance as at 1 October ,276 (331,254) (34,917) 277,105 17, ,860 Changes in equity for the quarter ended 31 December 2013 Return of capital (111,536) - - (111,536) - (111,536) Total comprehensive income - (2,139) 1,240 (899) (60) (959) Balance as at 31 December ,740 (333,393) (33,677) 164,670 17, ,365 PAGE 16 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

19 MIIF Share capital Accumulated losses Total equity Balance as at 1 January ,740 (361,030) 170,710 Changes in equity for the year ended 31 December 2014 Dividends paid - (9,199) (9,199) Total comprehensive income - (25,267) (25,267) Balance as at 31 December ,740 (395,496) 136,244 Balance as at 1 October ,740 (390,719) 141,021 Changes in equity for the quarter ended 31 December 2014 Total comprehensive income `- (4,777) (4,777) Balance as at 31 December ,740 (395,496) 136,244 Balance as at 1 January ,165,321 (357,719) 807,602 Changes in equity for the year ended 31 December 2013 Return of capital (633,581) - (633,581) Dividends paid - (74,166) (74,166) Total comprehensive income - 70,855 70,855 Balance as at 31 December ,740 (361,030) 170,710 Balance as at 1 October ,276 (360,350) 282,926 Changes in equity for the quarter ended 31 December 2013 Return of capital (111,536) - (111,536) Total comprehensive income - (680) (680) Balance as at 31 December ,740 (361,030) 170,710 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 17

20 CHANGES IN SHARE CAPITAL As set out in the announcements dated 30 April 2013 and 29 May 2013, post the completion of the divestment of TBC to Macquarie APTT Management Pte. Limited, the Trustee-Manager of Asian Pay Television Trust (APTT), MIIF distributed the proceeds from the divestment to Shareholders as a return of capital. MIIF received the consideration from the divestment in the form of Units in APTT (the MIIF APTT Units) and pursuant to the distribution, entitled depositors and entitled scrip-based shareholders of MIIF were entitled to MIIF APTT Units in proportion to the number of issued shares of MIIF held by them as at the record date (fractional entitlements disregarded) (the Entitlement) or could elect, using the notice of cash election, to receive in cash all but not part of such entitlement (the cash election). Shareholders who did not exercise the cash election had the number of MIIF APTT Units comprised in their entitlement allotted to them and (in the case of entitled depositors) credited to their respective securities account. Shareholders who exercised the cash election received the cash amount equivalent to the initial public offering price of the Units multiplied by the number of MIIF APTT Units comprised in their entitlement (the cash distribution). Subsequent to the divestment of TBC and CXP, the share premium amount was reduced by $522.0 million and $111.5 million respectively for the capital returned to MIIF shareholders. There were no share buy-backs during the year ended 31 December There were no changes to share capital during the quarter and year ended 31 December PAGE 18 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

21 CONSOLIDATED STATEMENT OF CASH FLOWS Cash flows from operating activities Quarter ended Quarter ended (Loss)/profit after income tax (6,703) (2,071) (36,885) 64,400 Adjustments for non cash items: Amortisation ,269 Unrealised foreign exchange (gain)/loss (432) 1,112 7,332 (6,945) Amortisation of transaction costs Revaluation of financial assets at fair value through profit or loss 18,175 (83) 38,884 (20,699) Gain on divestment in unlisted securities (39,473) Net loss on disposal of subsidiary ,859 Changes in working capital: Decrease/(increase) in trade and other receivables 451 (158) Increase/(decrease) in trade and other payables 1, ,301 (3,425) Decrease/(increase) in other assets (259) Net cash generated/(used in) from operating activities 13,427 (1,043) 11,246 9,387 Cash flows from investing activities Disposal of financial assets at fair value through profit and loss ,305 Disposal of subsidiary, net of cash disposed of Net cash generated from investing activities ,400 Cash flows from financing activities Return of capital - (111,536) - (633,581) Dividends paid - - (9,199) (74,166) Movement in restricted cash of subsidiary ,421 Net cash used in financing activities - (111,536) (9,199) (706,326) Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of financial period Cash and cash equivalents at end of financial period 13,427 (112,484) 2,047 (62,539) 4, ,597 16,113 78,652 18,160 16,113 18,160 16,113 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 19

22 RECONCILIATION OF NET INCOME ON AN ADJUSTED BASIS TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME The income statement on page 9 of this report, and specifically the line titled Net (loss)/income on an adjusted basis, has been prepared so as to present the earnings out of which MIIF dividends will be paid over time. However, income in excess of distributions in one year may be used to cover small shortfalls in other years. The income statement on page 9 has not been prepared in accordance with applicable accounting standards. The consolidated statement of comprehensive income on page 13 has been prepared in accordance with IFRS. The table below reconciles net income on an adjusted basis for the year ended 31 December 2014 presented in the income statement on page 9 of this report to the consolidated statement of comprehensive income for the year ended 31 December 2014 disclosed on page 13. Income Net income 1 on an adjusted basis GAAP adjustments 2 Consolidation adjustments 3 MIIF 4 Income from investment 12,315 (12,315) - - Interest income Net foreign exchange loss (244) (11) (7,753) (8,008) Net loss on financial assets at fair value through profit or loss - (22,625) (3,064) (25,689) Other income Total income 12,085 (34,951) (10,198) (33,064) Expenses Base management fees (785) - - (785) Professional services (313) - (55) (368) Directors fees (653) - (292) (945) Other operating expenses (650) - (1,073) (1,723) Total operating expenses (2,401) - (1,420) (3,821) Profit/(loss) before income tax 9,684 (34,951) (11,618) (36,885) Income tax expense Profit/(loss) after income tax 9,684 (34,951) (11,618) (36,885) Non-controlling interest - - 4,049 4,049 Profit/(loss) attributable to owners of the parent 9,684 (34,951) (7,569) (32,836) This is the net income on an adjusted basis presented in the income statement on page 9. These are adjustments that must be made to the net income on an adjusted basis to arrive at the net income on an unconsolidated basis, prepared in accordance with IFRS. This column includes adjustments made to MIIF s stand-alone income statement to include results of its subsidiaries as shown in note K(ix)(b) on page 39. This materially comprises the results of South China Highway Development (H.K.) Limited. This is the consolidated statement of comprehensive income of the MIIF disclosed on page 13. PAGE 20 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

23 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED MANAGEMENT REVIEW: FOR THE QUARTER AND YEAR ENDED 31 DECEMBER 2014 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 21

24 REVIEW OF REVENUE AND EXPENSES FOR THE QUARTER AND YEAR ENDED 31 DECEMBER 2014 Presented in the income statement disclosed on page 9 REVIEW OF REVENUE Income from investments is 12.3 million for the year ended 31 December 2014 (2013: $20.0 million). Following the sale of CXP, Miaoli Wind and TBC during 2013, MIIF only has one remaining business, HNE, which has paid its annual distribution in December quarter. Total revenue includes interest income generated on surplus cash balances, realised net foreign exchange (loss)/gain and other income. The foreign exchange loss of $0.2 million is due to realisation of hedges relating to the HNE distribution received during the quarter ended 31 December A) INCOME FROM INVESTMENTS MIIF s income from investments is derived from the following sources: Distributions and other income arising from the normal operating earnings of the investments. These distributions and other income from the investments are recurring in nature. One-off distributions arising from capital management initiatives such as, but not limited to, refinancing or asset sales. These one-off distributions are non-recurring in nature. There were no such items in the current period or pcp. The table below provides a detailed breakdown of the income from investments recognised by MIIF during the following reporting periods: Income from investments Quarter ended Quarter ended HNE 12,315-12,315 12,105 TBC ,918 Total income from investments 12,315-12,315 20,023 PAGE 22 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

25 Distribution Policy The distribution policy of MIIF s businesses is to distribute all net cash flows generated from operations, reduced for debt servicing costs and maintenance capital expenditure, subject to legal requirements and prudent reserves. As outlined in the announcement on 18 December 2012, the Board decided to undertake a number of initiatives including the pursuit of the orderly divestments of MIIF s interest in its investments. As at 31 December 2014, MIIF has disposed of all its businesses except HNE. Accordingly, MIIF will receive distributions only from this asset. The following table shows the typical historic timing of distributions from HNE: Investment portfolio Frequency per annum Distribution declaration period HNE 1 December Due to local regulatory and legal requirements, there is a time delay between the date distributions from the asset is generated and the date they are declared and received by MIIF. HNE has paid its distributions in respect of the 2013 financial year in the December quarter of These funds will be used for payment of distribution to MIIF shareholders which is payable on 16 March Dividends paid by MIIF will be made only out of surplus cash not needed for working capital purposes or for prudent reserves. As HNE pays dividend once a year, it is expected that MIIF will also now pay an annual dividend. However, it is stressed that a sale of HNE is being pursued and should this occur in advance of the next scheduled distribution, following the 2014 distribution, there may be no further dividend payments made by MIIF. A sale would be subject to shareholder approval and any proceeds would be returned to MIIF shareholders in the form of a return of capital. B) OTHER REVENUE ITEMS (i) Interest income Interest income for the year ended 31 December 2014 was $0.01 million (2013: $0.04 million). (ii) Realised net foreign exchange (loss)/gain Realised net foreign exchange loss for the year ended 31 December 2014 was $0.2 million (2013: gain of $0.01 million). (iii) Other income Other income comprises refund of unclaimed cash distribution pertaining to period up to 31 March 2008 of $4,138 (2013: nil). MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 23

26 C) REVIEW OF EXPENSES Expenses Quarter ended Quarter ended Base management fees ,947 Directors fees Lending fees Other operating expenses ,187 Total operating expenses ,401 5,845 MIIF s total operating expenses of $2.4 million for the year ended 31 December 2014 were $3.4 million lower compared to the pcp. The decrease in total operating expenses was predominantly due to the reduction in base management fees and lower other operating expenses. An analysis of MIIF s expense items are as follows: (i) Base management fees MIIF s manager, MIMAL, receives a quarterly fee that is calculated on MIIF s net investment value (NIV) for that quarter. NIV for any quarter equals the market capitalisation of the Company, plus external borrowings and any firm commitment by the Company to make further investments, less the amount of cash and cash equivalents held by the Company and its wholly owned special purpose entities. Base management fees of $0.8 million for the year ended 31 December 2014 are $1.2 million lower than the pcp. The reduction is mainly driven by MIIF s lower share price which resulted from the 55.1 cps return of capital following MIIF s divestment of TBC and CXP in The following table provides a reconciliation of the movement in base management fees compared to the pcp. Quarter ended Quarter ended MIIF market capitalisation 104, , , ,704 2 MIIF net (cash)/debt 1 (3,989) (16,090) (5,021) 2 (42,090) 2 Net investment value 100, , , ,614 Base management fee (0.75% per annum) ,947 1 Refers to net (cash)/debt held by MIIF and its wholly owned subsidiaries. 2 MIIF s market capitalisation for the year ended is the average of the four relevant calculation periods from Quarter 1 to Quarter 4. MIIF s net (cash)/debt for the year ended is an average of the balances at each quarter end reporting date. PAGE 24 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

27 (ii) Directors fees Each independent director is entitled to receive an annual director s fee of US$72,500. Following the appointment of two independent directors on 25 March 2013, one to replace a resigning independent director, the Board comprises six members, of which five are independent of Macquarie. The remaining Director, who is an executive of Macquarie, is not entitled to be paid a director s fee. In light of the additional work undertaken by the directors in connection with the strategic review, which was beyond the ordinary duties of the directors, the remuneration committee commissioned an independent consultant to investigate whether an additional payment to the directors was warranted in the circumstances. Based upon the independent consultant s findings, which was based on market comparisons, the remuneration committee recommended that an additional payment be paid to the independent directors. This recommendation was accepted and a resolution was passed by the board to this effect. Please see note I(ii) on page 35 for details on the directors fees. (iii) Lending fees During the pcp, lending fees include a one-off cancellation fee paid to cancel MIIF s $100.0 million Company level debt facility thereby removing all future lending fees. (iv) Other operating expenses Other operating expenses were $1.0 million for the year ended 31 December 2014 which was $2.2 million lower than the pcp. The expense incurred in pcp included a number of legal and professional fees incurred on the implementation of the strategic review. Ongoing items that are reflected in this category relate to MIIF s normal day-to-day operations. These items include fees paid for share registrar services, SGX-ST listing and administration services, general legal services, audit services and other professional services. MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 25

28 REVIEW OF NET ASSETS AND STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2014 As presented in the statements of financial position disclosed on page 12 D) ASSETS (i) Cash and cash equivalents Stand-alone Company level cash and cash equivalents decreased from $16.0 million as at 31 December 2013 to $4.0 million as at 31 December The decrease in cash and cash equivalents is predominantly due to payment of the final ordinary dividend of $9.2 million pertaining to FY 2013 which was paid during the quarter ended 31 March cash and cash equivalents increased from $16.1 million as at 31 December 2013 to $18.2 million as at 31 December The increase is due to receipt of distribution of $13.5 million from HNE, partially offset by payment of the final ordinary dividend of $9.2 million pertaining to FY 2013 which was paid during the quarter ended 31 March (ii) Trade and other receivables Stand-alone current trade and other receivables increased from $0.2 million as at 31 December 2013 to $12.5 million as at 31 December 2014 primarily due to distribution receivable from Macquarie International China Holdings Limited (MICHL). current trade and other receivables decreased from $0.7 million as at 31 December 2013 to $0.1 million as at 31 December 2014 primarily due to decrease in amounts due from trade debtors. (iii) Stand-alone financial assets at fair value through profit or loss On 18 December 2012, the Board announced that it intends to pursue the orderly divestment of MIIF s interests in its financial assets. Accordingly, financial assets at fair value through profit or loss were classified as current financial assets at fair value through profit or loss as at 31 December However, the Board does not guarantee that the disposal of financial assets will occur within 12 months. In line with its accounting policy, MIIF continues to hold its financial assets at fair value through profit or loss. The fair value of financial assets does not include transaction costs that may be incurred on disposal. Transaction costs are expensed as incurred in the consolidated statement of comprehensive income. Stand-alone current financial assets (excluding forward foreign currency contracts) at fair value through profit or loss decreased from $155.2 million as at 31 December 2013 to $120.2 million as at 31 December The decrease in valuation of MIIF s investments was substantially due to: Downward revaluation of HNE of $25.4 million; Net foreign exchange gain of $2.8 million arising from the translation of MIIF s assets from foreign currencies to Singapore dollars; and Distribution income from HNE of $12.3 million. PAGE 26 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

29 The following table sets out a reconciliation of the value of MIIF s investments from 31 December 2013 to 31 December Unlisted securities Company Balance at Investment / (divestment) Income received from investments Foreign exchange effects Revaluation to Company Balance at HNE 155,105 - (12,315) 2,802 (25,410) 120,182 Others Total investments 155,120 - (12,315) 2,802 (25,410) 120,197 The reduction in the valuation of HNE during 2014 reflects in part, the expectation that the slowdown in the Chinese economy would moderate HNE's future performance. In addition, HNE has undertaken an assessment of maintenance costs and capital expenditure requirements following the strong growth in traffic driven by on-going driver recognition of HNE s lower toll rates. It is expected that additional capital expenditure will be required to ensure that maintenance standards continue to be met. (iv) financial assets at fair value through profit or loss financial assets at fair value through profit or loss were classified as current financial assets at fair value through profit or loss, in line with the classification at the Company level. In line with its accounting policy, continues to hold its financial assets at fair value through profit or loss. The fair value of financial assets does not include transaction costs that may be incurred on disposal. Transaction costs are expensed as incurred in the consolidated statement of comprehensive income. current financial assets (excluding forward foreign currency contracts) at fair value through profit or loss decreased from $172.4 million as at 31 December 2013 to $133.6 million as at 31 December The explanation for the movement at level is materially the same as for the Company level other than adjustments made to reflect the fair value of the s investments. MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 27

30 E) LIABILITIES (i) Trade and other payables Stand-alone current trade and other payables decreased from $0.7 million as at 31 December 2013 to $0.5 million as at 31 December 2014 primarily due to reduction in management fee payable as the base fee rate and NIV has reduced during the year. current trade and other payables increased marginally from $7.0 million as at 31 December 2013 to $8.3 million as at 31 December (ii) Non-controlling interest Non-controlling interest represents the share of s net asset value attributable to the minority shareholder of South China Highway Development (H.K.) Limited (a subsidiary holding MIIF s interest in HNE). PAGE 28 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

31 F) NET ASSET VALUE MIIF uses the discounted cash flow (DCF) approach to value its investments. These valuations reflect the fair value for which infrastructure assets could be exchanged between knowledgeable, willing parties in an orderly arm s length transaction. MIIF calculates the fair value of each of its assets at the end of each calendar quarter and adjusts the carrying value of each investment to its fair value. This process generates revaluation gains and losses, which are reported in the consolidated statement of comprehensive income as Net (loss)/gain on financial assets at fair value through profit or loss. To ensure that the DCF analysis continues to provide a fair value estimate that can be considered reliable, the valuation model is periodically benchmarked to other sources such as recent market transactions. It should be noted that the preparation of the financial report in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the accounting policies. Estimates and judgements are continually evaluated and are based on historic experience and other factors, including reasonable expectations of future events. Management believes the estimates used in preparation of the financial report are reasonable. Actual results in the future, however, may differ from those reported. The valuation of MIIF s investments has been determined by reference to changes to the respective asset s discount rate, adopted by the Board in accordance with its valuation framework. The discount rate applied to the cash flows of a particular asset comprises the risk free interest rate appropriate to the country in which the asset is located and a risk premium, reflecting the uncertainty associated with the cash flows. As the proposed actions to divest the assets of MIIF may take an undetermined time, MIIF will continue as a going concern. So, no liquidation and other transaction costs are included in the consolidated statement of comprehensive income. (i) The investment valuation sensitivity to movements in the discount rate is disclosed in the table below: Change in valuation due to movement in discount rate Dec 14 1% higher Dec 14 1% lower Dec 13 1% higher Dec 13 1% lower HNE (6,677) 7,250 (9,812) 10,750 Total (6,677) 7,250 (9,812) 10,750 (ii) The investment valuation sensitivity to movements in the revenue forecasts are disclosed in the table below: Change in valuation due to movement in revenue forecast Dec 14 1% higher Dec 14 1% lower Dec 13 1% higher Dec 13 1% lower HNE 4,199 (4,190) 4,518 (4,519) Total 4,199 (4,190) 4,518 (4,519) MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 29

32 Net Asset Value 1 As at As at Company As at Company As at Total net asset value 2 () 130, , , ,710 Total number of ordinary shares on issue used in calculation of net asset value per share ( 000) 1,149,857 1,149,857 1,149,857 1,149,857 Net asset value per ordinary share ($) MIIF s stand-alone NAV decreased from $170.7 million as at 31 December 2013 to $136.2 million as at 31 December 2014, decreasing its NAV per share to $0.12 at the end of the year. net assets value decreased from $164.7 million as at 31 December 2013 to $130.1 million as at 31 December In addition, it should also be noted that no provisions for transaction costs or the potential success fee 1 to be earned by MIIF s manager has been made as at 31 December It should be noted that MIIF s NAV as at 31 December 2014 of $136.2 million (or 11.8 cps) is comparable to MIIF s NAV as at 30 September 2014 of $141.0 million (or 12.3 cps). Company As at Company As at 31 Mar 14 Company As at 30 Jun 14 Company As at 30 Sep 14 Company As at Net asset value per ordinary share 1 ($) Reference is made to the amended management fee arrangement with MIIF s manager, Macquarie Infrastructure Management (Asia) Pty Limited (MIMAL), which was approved by MIIF s shareholders at the MIIF Annual General Meeting on 8 March MIMAL will be entitled to a success fee when total divestment proceeds of $694.9 million (the threshold level) are achieved from the divestment of TBC, HNE, CXP and Miaoli Wind. Divestment proceeds received from the sale of TBC, CXP and Miaoli Wind were $617.3 million. The threshold level will be met if divestment proceeds from the sale of HNE exceed $77.6 million. However, since the conditions for MIIF to pay the success fee have not been met, there is no present obligation to pay the success fee and accordingly a provision for a potential success fee has not been made as at 31 December Refer to note K(x) on page 40. Represents net asset value attributable to shareholders, excluding non-controlling interest. PAGE 30 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

33 G) ENTERPRISE VALUE MIIF s Enterprise Value (EV) is calculated by aggregating: Proportionate operating businesses net debt, based on MIIF s proportionate interest as at 31 December 2014; MIIF s net (cash)/debt outstanding as at 31 December 2014; and MIIF businesses equity attributable to MIIF s shareholders as at 31 December As at As at Proportionate operating businesses net debt 359, ,686 MIIF net (cash)/debt (3,989) (16,020) MIIF businesses equity attributable to MIIF s shareholders 120, ,120 EV 475, ,786 Net debt as a percentage (%) of EV Total MIIF net debt as a % of EV Net debt is reported at both the operating business level and at MIIF level. Operating businesses net debt is calculated at each of the relevant operating businesses by subtracting total cash-on-hand from total debt as at 31 December Operating business total debt is non-recourse to MIIF and is presented here only for the purposes of computing EV. The operating businesses equity value attributable to MIIF shareholders is calculated by aggregating MIIF s interest in the fair values of the individual businesses. MIIF s total gearing as a percentage of EV was 75% as at 31 December Total gearing is calculated by dividing the sum of MIIF s proportionate beneficial interest in the operating businesses net debt and MIIF s net debt by EV. MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 31

34 H) OPERATING SEGMENTS The s principal activity during the year ended 31 December 2014 was the investment in remaining one asset viz. HNE. Management has determined the operating segments based on the reports reviewed by the Manager and the Board. These reports are used to measure performance, monitor risks and rewards associated with the specific asset and to make strategic decisions. Comparative information for the year ended 31 December 2013 has been disclosed accordingly. Operating segments for Dec 2014 People s Republic of China CXP HNE Taiwan Grand Total TBC Revenue - (25,730) - (25,730) Segment loss before income tax - (25,730) - (25,730) Net loss before income tax (25,730) As at 31 Dec 2014 Segment assets - 133, ,552 Total segment assets 133,552 Operating segments for Dec 2013 People s Republic of China CXP HNE Taiwan Grand Total TBC Revenue 11,502 33,513 33,599 78,614 Segment profit before income tax 11,502 33,513 33,599 78,614 Net profit before income tax 78,614 As at 31 Dec 2013 Segment assets - 172, ,356 Total segment assets 172,356 Revenue comprises the net gain/(loss) on financial assets at fair value through profit or loss (excluding forward foreign currency contracts and interest rate swaps). Segment assets represent the fair value of MIIF s businesses. PAGE 32 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

35 Reconciliation A reconciliation of profit before income tax for reportable segments to profit before income tax as shown in the consolidated statements of comprehensive income is as follows: (Loss)/profit before tax for reportable segments (25,730) 78,614 Other segments - - Segment (loss)/profit before income tax (25,730) 78,614 Unallocated revenue (7,334) 5,930 Unallocated expenses (3,821) (20,239) Effect on deconsolidation - 95 (Loss)/profit before income tax (36,885) 64,400 Unallocated revenue comprises power supply revenue, interest income, net foreign exchange gain, net gain/(loss) on foreign exchange hedge contracts and interest rate swaps held at fair value through profit or loss, and other income as shown in the consolidated statements of comprehensive income. Unallocated expenses comprise total operating expenses as shown in the consolidated statements of comprehensive income. Reportable segments' assets are reconciled to total assets as follows: As at As at Segment assets for reportable segments 133, ,356 Other segments - - Total segment assets 133, ,356 Unallocated assets: Cash and cash equivalents 18,160 16,113 Trade and other receivables Other assets Total assets 151, ,327 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 33

36 Reportable segments liabilities are reconciled to total liabilities as follows: As at As at Segment liabilities for reportable segments - - Unallocated liabilities: Trade and other payables 8,263 6,962 Total liabilities 8,263 6,962 Breakdown of Revenue Financial period from 1 January to 30 June Variance 1 % Total (loss)/revenue from continuing operations for the financial period (29,446) 75,589 (>100.0) Operating (loss)/income after tax for the financial period (31,071) 53,068 (>100.0) Financial period from 1 July to 31 December Total (loss)/revenue from continuing operations for the financial period (3,618) 8,955 (>100.0) Operating (loss)/income after tax for the financial period (5,814) 11,332 (>100.0) Financial year to 31 December Total (loss)/revenue from continuing operations for the financial year (33,064) 84,544 (>100.0) Operating (loss)/income after tax for the financial year (36,885) 64,400 (>100.0) 1 A positive variance is favourable to the and a negative variance is unfavourable to the. PAGE 34 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

37 I) RELATED PARTY TRANSACTIONS (i) Directors The following persons were directors of MIIF during the year ended 31 December 2014: Date of appointment Date of resignation Heng Chiang Meng 7 February 2005 Not applicable Robert Andrew Mulderig 7 February 2005 Not applicable Lee Suet Fern 20 December 2007 Not applicable Francis Pui-Cheun Kwok 29 June 2011 Not applicable Alexander Ribaroff 25 March 2013 Not applicable Philip Jackson 25 March 2013 Not applicable (ii) Directors remuneration Francis Pui-Cheun Kwok is an executive director of Macquarie Limited (MGL), the ultimate parent entity of MIMAL, and is not entitled to any remuneration from MIIF, other than reimbursement of expenses incurred on behalf of MIIF. Heng Chiang Meng, Robert Andrew Mulderig, Lee Suet Fern, Alexander Ribaroff and Philip Jackson are entitled to a total remuneration of US$72,500 per annum each. The directors are key management personnel of the. The remuneration of directors is set out below: Fees Additional Fees Total Total Independent Directors Heng Chiang Meng Robert Andrew Mulderig Lee Suet Fern Alexander Ribaroff Philip Jackson Michael David Hamer 1, Executive Director Francis Pui-Cheun Kwok Each independent director is entitled to total remuneration of US$72,500 (2013: US$72,500) per annum. The table above represents the equivalent amount in SGD. Represents one-off payment to the Independent directors for the additional work undertaken during and as a result of the strategic review (refer note C(ii) on page 25 for further details). Michael David Hamer resigned as a director on 25 March Francis Pui-Cheun Kwok is not entitled to any remuneration from MIIF other than reimbursement of expenses incurred on behalf of MIIF. MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 35

38 (iii) The Manager The Manager was appointed by MIIF pursuant to a management agreement dated 19 May At the MIIF Annual General Meeting on 8 March 2013, shareholders approved the amendment of the management agreement entered into between MIIF and MIMAL. The amended management agreement reduced the base fee to 0.75% per annum on MIIF s NIV with effect from 1 January 2013, instead of the previous rate of 1.50% per annum. The following transactions occurred between MIIF and the Manager during the period: Transactions Company Company Base management fees 785 1, ,947 Dividends 854 6, ,887 Return of capital - 58,835-58,835 The following balances remained outstanding between MIIF and the Manager: Balances as at as at Company as at Company as at Accrued base management fees The Manager holds 106,776,610 ordinary shares in MIIF. Under the amended management agreement, MIMAL will no longer be entitled to a performance fee. Instead, MIMAL will be entitled to a success fee linked to the successful divestment of MIIF s businesses. The purpose of the success fee is to complement the revised base fee by better aligning MIMAL with MIIF s strategy of maximising and returning value to shareholders. Refer note K(x) on page 40. (iv) Macquarie (Macquarie) There were no fees paid to Macquarie during the quarter and year ended 31 December 2014 in respect of transaction related services. (v) Interested Party Transactions (IPTs) The has not obtained a general mandate from shareholders for IPTs. PAGE 36 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

39 J) FOREIGN EXCHANGE TRANSACTIONS MIIF utilises the services provided by MGL s foreign exchange department from time to time to enter into foreign exchange forward contracts based on arms length competitive market rates. The listing of foreign currency transactions entered into and the relevant related party charges incurred, if any, are provided to the independent members of the Board for review. K) ADDITIONAL INFORMATION (i) Announcement of financial statements Pursuant to Rule 705(1) of the SGX-ST listing manual, the financial statements for the quarter and year ended 31 December 2014 have been disclosed within 60 days after the end of the relevant financial period. (ii) Directors remuneration Please refer to information disclosed in note I(ii) on page 35. (iii) Persons occupying managerial positions who are related to a director, CEO or substantial shareholder Pursuant to Rule 704(13) of the SGX-ST listing manual, we confirm that for the quarter and year ended 31 December 2014 there were no persons occupying managerial positions in the Company or the Company s principal subsidiaries who were relatives of a director, chief executive officer and/or substantial shareholder of the Company. (iv) Review of the provision of non-audit services by the auditors The Audit Committee has undertaken a review of non-audit services provided by the auditor and they would not, in the opinion of the Audit Committee, affect their independence. (v) Review by independent auditor The financial statements for the year ended 31 December 2014 have not been audited or reviewed by the s auditor s PricewaterhouseCoopers LLP, however they form the basis of the financial report within the MIIF annual report 2014, which will be audited by PricewaterhouseCoopers LLP and will be available publicly in due course. (vi) Basis of preparation The has applied the same accounting policies and methods of computation in the preparation of the financial statements for the current period as that of preceding accounting periods. There were no substantial changes to the s accounting policies. Based on the announcement on 18 December 2012, regarding the completion of the strategic review, management assessed the situation at 31 December 2014 and concluded that the Company will operate for the foreseeable future (greater than 12 months) and thus these financial statements have been prepared on a going concern basis. The financial statements presented in this report and in the financial report within the MIIF annual report 2014 to be released as audited financial statements for 2014 are consistent with those set out in the 2013 audited financial statements which have been prepared in accordance with IFRS. There have been no changes to the accounting policies described in the 2013 audited financial statements. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the s accounting policies. Estimates and judgements used in preparing the financial statements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 37

40 (vii) Functional and presentation currency All figures, unless otherwise stated are presented in Singapore dollars, which is MIIF s functional and presentation currency. (viii) Rounding of amounts in the financial statements Amounts in the financial statements have been rounded to the nearest thousand dollars, unless otherwise indicated. (ix) accounting - subsidiaries a) Subsidiaries are all entities (including special purpose entities) over which the has the power to govern the financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the controls another entity. Subsidiaries are consolidated from the date on which control is acquired or otherwise obtained by the. They are deconsolidated from the date that control ceases. At the date when control ceases, the assets and liabilities of these subsidiaries are de-recognised at their carrying amounts and any resulting difference are recognised as a gain or loss in profit or loss attributable to the. Gain on deconsolidation is the net gain recognised due to deconsolidation of Miaoli Wind on 14 November 2013 the results of which are as follows: Income Quarter ended Quarter ended Power supply revenue ,261 Net foreign exchange loss (197) Net gain on financial assets at fair value through profit or loss Total income ,099 Expenses Finance costs (1,160) Repair & maintenance expenses (705) Professional services (183) Amortisation (2,269) Other operating expenses (687) Total operating expenses ,004 Effect on deconsolidation PAGE 38 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

41 b) The following entities were subsidiaries as at 31 December 2014: Name of entity Type Principal activities South China Highway Development (H.K.) Limited Macquarie International China Holdings Limited Subsidiary Investment in Toll Road Country of incorporation Percentage of effective equity held by the Reporting date Hong Kong 90% 31 December Subsidiary Holding Company Bermuda 100% 31 December During the year, MIIF liquidated the following entities: i) Macquarie Renewables Limited has been liquidated effective 18 February ii) Macquarie International Infrastructure Netherlands B.V. has been liquidated effective 02 December iii) Macquarie International Infrastructure Netherlands 2 Cooperatief U.A has been liquidated effective 01 December MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 39

42 (x) Contingencies On 18 December 2012, the Board completed a strategic review to consider a range of alternatives focussed on generating value for shareholders (strategic review). After considering the observations arising from the strategic review and assessing the alternatives available to MIIF, the Board concluded that in order to maximise value for shareholders the strategy for MIIF should change. As a result, the Board decided, inter alia, to pursue the orderly divestment of MIIF s interests in TBC, HNE, CXP and Miaoli Wind. The revised strategy substantially alters the focus of MIIF and, if successfully implemented, would lead to the winding down of MIIF. Accordingly, the independent directors of the Board concluded that it was appropriate to amend the management agreement with MIIF s manager, MIMAL, to better align with MIIF s strategy of maximising divestment proceeds. The amendment of the management agreement was approved by shareholders at the MIIF Annual General Meeting (AGM) on 8 March Under the amended management agreement, MIMAL will be entitled to a success fee linked to the successful divestment of MIIF s businesses. As such, MIMAL will be entitled to success fee only when a certain level of divestment proceeds 1 is achieved (the threshold level) and will share in any excess divestment proceeds generated above the threshold level. The threshold level was approved at $694.9 million. Should the threshold level not be met then MIMAL would not receive a success fee. The success fee is determined as follows: i) if the aggregate divestment proceeds are equal to the threshold level, the success fee is equal to $15.0 million; or ii) if the aggregate divestment proceeds are more than the threshold level but not more than the Board s valuation as at 31 December 2012 (i.e. $731.5 million), the success fee is equal to: - $15.0 million; plus % of the amount by which aggregate divestment proceeds exceed the threshold level; or iii) if the aggregate divestment proceeds are more than the Board s valuation as at 31 December 2012, the success fee is equal to: - $18.7 million; plus % of the amount by which aggregate divestment proceeds exceed the Board s valuation as at 31 December Divestment proceeds received from the sale of TBC, CXP and Miaoli Wind were $617.3 million. The threshold level will be met if divestment proceeds from the sale of HNE exceed $77.6 million. However, the conditions for MIIF to pay the above success fee have not currently been met. Consequently, there is no present obligation to pay the success fee and accordingly no provision has been made for any success fee as at 31 December As per amended management agreement, Divestment proceeds means the Singapore Dollar equivalent of the proceeds from all or part of the divestment of CXP, HNE, TBC and Miaoli Wind, less: transaction costs incurred by MIIF associated with such divestments, which, for the avoidance of doubt, do not include the Success Fee; and if, after 31 December 2012 and prior to the date of its divestment, the businesses (CXP, HNE, TBC and Miaoli Wind) being divested breaches its distribution policy such that cash that could otherwise have been distributed is instead retained by the businesses or utilised by the businesses to make voluntary unscheduled debt repayments, any cash amounts that would have been received by MIIF, had the businesses adhered to its distribution policy. PAGE 40 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

43 INVESTMENT PORTFOLIO DISCUSSION Hua Nan Expressway (HNE) Date of initial acquisition Valuation 2 19 Nov 2007 S$120.2 million Hua Nan Expressway Phase I and II (HNE) is a 31-kilometre dualcarriage urban toll road in the city of Guangzhou, the capital of Guangdong province in China. It is the main artery for north-south Distributions received in 2014 S$12.3 million traffic in Guangzhou, enabling easy access to South China and is MIIF ownership 81% interest intersected by eight expressways and urban arteries, ensuring % of MIIF portfolio % excellent connectivity. As an urban toll road in Guangzhou, HNE benefits from being exposed to the long term traffic growth potential of Guangdong province. HNE has an established traffic history since 1999, with the exclusive right to operate and collect tolls 1 up to It is anticipated to benefit from the strong growth in vehicle ownership in Guangzhou and Guangdong province as a result of increasing affluence in region. It is managed by a strong senior management team with extensive industry expertise. Key operational statistics can be found in the tables below. Total volume of vehicles types ( 000) 3 months to Dec months to Dec 2013 Variance Fav/(Adv) 12 months to Dec months to Dec 2013 Variance Fav/(Adv) Passenger vehicles 16, , % 62, , % Minibus/Light truck % 2, , % Medium bus/truck 1, ,069.4 (7.1%) 7, , % Large bus/truck % % Heavy duty truck/trailer (23.3%) 1, ,998.5 (6.2%) Total Vehicles 19, , % 75, , % (RMB million) 3 months to Dec months to Dec 2013 Variance Fav/(Adv) 12 months to Dec months to Dec 2013 Variance Fav/(Adv) Revenue % % Operating expenses (37.7) (34.6) (9.0%) (125.1) (112.0) (11.7%) EBITDA % % EBITDA margin 75.8% 75.2% 0.6% 78.7% 78.4% 0.3% 1 Toll rates on HNE are set by the Guangdong provincial government. 2 As at 31 December MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 41

44 BUSINESS COMMENTARY Performance (12 Months to December 2014) HNE s revenue of RMB588.5 million for the 12 months to 31 December 2014 was 13.7% higher than the prior corresponding period driven by an 11.5% increase in traffic for the period. Total traffic volumes were 11.5% higher compared to the prior corresponding period mainly due to: The continued positive impact of Guanghe Expressway, a complementary feeder road which opened in December 2011; and On-going driver recognition of HNE s lower toll rates following the toll rate standardisation; and The partial closure of a section on Xinguang Expressway and a section on Northern Ring Road for road works which have resulted in traffic diverting to alternative roads such as HNE. The section on Xinguang Expressway has re-opened to traffic since August 2014 and the section on Northern Ring Road has re-opened to traffic since October Operating expenses were 11.7% higher than the prior corresponding period primarily driven by the payment of volume related toll clearing fees to the Unitoll Company which became effective from August In 2012, the networks in the central region of Guangdong province were combined with the Guangzhou network where HNE is located. As part of the merger, the Unitoll Company was appointed as the sole provider of toll clearing services for the merged network. All toll roads in the merged network are required to pay fees to the Unitoll Company for clearing tolls. Outlook Whilst HNE, in the twelve months to 31 December 2014, has benefited from favourable traffic drivers (such as those illustrated above), the slowdown in the Chinese economy is anticipated to moderate the rate of growth in HNE's traffic volumes. In addition, HNE is no longer benefitting from the traffic diversion caused by the partial closure of a section of Xinguang Expressway and a section of the Northern Ring Road as road works concluded in HNE has undertaken an assessment of maintenance costs and capital expenditure requirements following the strong growth in traffic driven by on-going driver recognition of HNE s lower toll rates. It is expected that additional capital expenditure will be required to ensure that maintenance standards continue to be met. In accordance with MIIF s continuous disclosure obligations, MIIF will keep the market appropriately informed of further developments in the divestment of HNE. PAGE 42 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED

45 CONFIRMATION OF THE BOARD PURSUANT TO RULE 705(5) OF THE LISTING MANUAL On behalf of the Board of Directors of Macquarie International Infrastructure Fund Limited, we, the undersigned hereby confirm to the best of our knowledge that nothing has come to the attention of the Board of Directors of the Company which may render the financial statements for the quarter and year ended 31 December 2014 to be false or misleading in any material aspect. On behalf of the Board of Directors Heng Chiang Meng Francis Pui-Cheun Kwok Chairman Director Singapore Sydney 18 February February 2015 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED PAGE 43